The Alberta Securities Commission (the “ASC”) recently released the Credit For Exemplary Cooperation in Enforcement Matters policy (the “ASC Policy”). It joins the provinces of Ontario and British Columbia in encouraging persons and companies to self-report securities related misconduct and breaches of securities laws. The purpose of the ASC Policy is to explain the benefits of cooperating with the securities regulator and the factors the ASC will consider when granting credit for exemplary cooperation. Historically, securities regulators have faced difficulties in detecting securities related misconduct, and as such, regulators have come to see the merits in providing incentives for persons and companies to self-report.
The ASC Policy is intended for persons or companies who may have knowledge of or are involved in Alberta securities misconduct, persons or companies who are being investigated by the ASC, or persons or companies who are the subject of ASC enforcement actions.
What the ASC expects
Credit will only be given for cooperation that goes beyond what is already required under Alberta securities laws. In order to earn credit for exemplary cooperation the ASC expects companies to investigate and self-report possible securities misconduct or breaches of Alberta securities laws, disclose all available documents and records, ensure the companies’ employees and officers are available for interviews, investigate employees and officers’ conduct that may have breached Alberta securities laws, provide adequate compensation to any investors that may have been harmed and take corrective action.
Conduct not considered Exemplary Cooperation
The ASC Policy identifies a list of conduct where no credit will be given. Examples include when persons or companies fail to promptly and fully report misconduct, withhold or knowingly misrepresent information, claim the misconduct was based on prior legal advice, fail to correct inappropriate conduct or delay settlement agreements.
Examples of Credit for Exemplary Cooperation
Where credit is granted the ASC may issue a notice of hearing that acknowledges the exemplary cooperation, narrow the scope of allegations, resolve the matter through alternative means, reduce the costs and in limited circumstances conclude the matter without taking any enforcement action.
Comparisons with BC and Ontario’s Securities Regulators
British Columbia Securities Commission’s Credit for Assistance in Investigations (BCSC Policy) was released in 2002. It provides a general overview of circumstances where credit may be given, but unlike the ASC Policy it does not provide examples of non-exemplary conduct, nor does it provide a procedure for self-reporting and cooperation. Additionally, the BCSC Policy is more narrow in scope as it only applies to persons and companies before and during an investigation.
The Ontario Securities Commission (OSC) released its Credit for Cooperation Program (OSC Policy) in 2004 and a revised version in 2014. Similar to the ASC Policy, the OSC Policy provides examples of non-exemplary conduct, examples where credit will be rewarded, a detailed procedure for self-reporting and cooperation and disclosure policies. However, compared to the OSC Policy, the ASC Policy places a higher burden on those seeking credit for cooperation. As an example, the ASC expects that parties make best efforts to locate and obtain relevant documents, records and information held in foreign jurisdictions. The OSC Policy does not set out a similar expectation. Further, the OSC may recommend to have a matter not proceed by way of a quasi-criminal prosecution, whereas the ASC Policy specifically states that credit will not be offered when it is in the public interest to proceed with quasi-criminal or criminal investigation. Finally, the OSC Policy runs alongside the OSC’s whistleblower program which offers financial incentive to those who report information on serious securities related misconduct. The ASC does not currently have a similar program.
The ASC Policy affords some assurance to persons or companies who wish to self-report securities misconduct, where previously Alberta lacked such guidance.